Maldives downgraded to ‘fragile state’ by IMF

The Maldives has been downgraded to a “fragile state” by the IMF because of the tense political situation, the way business is regulated and how the country’s finances and budgets have been run in recent years.

The new classification is the latest blow to the Maldivian economy from the institution, which has repeatedly spoken of the high levels of debt being driven by the current administration’s ambitious infrastructure scale-up.

Other “fragile states” include Afghanistan, Haiti, Kosovo, Liberia, Mali, Myanmar, South Sudan, and Timor-Leste, according to the IMF.

“Given extensive government-guaranteed investment and lending, the impact of a severe tourism downturn on the fiscal position could be considerable,” said the body in its 88-page report about the Maldives.

“Other fiscal risks include possibly higher expenditures related to the 2018 Presidential election, as well as those associated with climate change mitigation and an increase in non-concessional financing.

“A shallow financial system concentrated in tourism and dominated by state-owned banks accentuates the linkages of risks across sectors. Political and domestic security risks remain elevated and are hard to predict with potential adverse economic effects if they escalate.”